Who will Drumpf favor - his pal, putin, who he called a genius when he openly invaded Ukraine OR the US natural gas industry?
U.S. LNG Sales To Ukraine Transform Global Energy Picture
Ken Silverstein
Senior Contributor
Ken Silverstein covers global energy and climate issues.
Jan 20, 2025,08:45am EST
Updated Jan 20, 2025, 02:50pm EST
CAMERON LOUISIANA - JUNE 7: A large liquified natural gas transport ship sits docked in the ... [+]
Houston Chronicle via Getty Images
The United States started shipping liquefied natural gas to Ukraine in December. This gesture aligns with Ukraine's decision to terminate its transit agreement with Russia on January 1, 2025. Ukraine's largest utility company, DTEK, has entered into a two-year contract with the U.S. company Venture Global.
Ukrainian President Zelensky announced that his country would formally end its business relationship with Russia, stating that the revenues—which amount to billions—are used to build weapons that kill Ukrainians. The move gives the United States more leverage in Western and Eastern European energy markets.
"This is an historic event. Russia is losing markets and will incur financial losses," said Ukraine's energy minister, Herman Halushchenkoon, on the Telegram messaging app via Business Insider. "Europe has already decided to phase out Russian gas, and this aligns with what Ukraine has done today."
This strategy aims to sever Russia's connection to Europe, which previously relied on it for 40% of its natural gas. In response to the war in Ukraine, Europe has committed to reducing its dependence on Russian gas and has successfully decreased its intake to 10%. Meanwhile, the United States has stepped in to fill some of the gap, now supplying about 38% of Europe's gas, which amounts to 5.2 million tons.
Interestingly, Russia continued to honor the 2019 agreement even while it was dropping bombs on Ukraine. By terminating the contract, Ukraine is giving up $800 million annually in transit fees. On the other hand, Russia's Gazprom stands to lose $5 billion in sales. Austria has stated that it is well prepared for the changes, while Slovakia expressed that Europeans will feel it more than the Russians.
Most analysts predict that the gas stoppage will not significantly impact European countries, although it will affect Moldova, a small nation located at the southern border of Ukraine. Moldova must now reduce its natural gas usage by one-third. Ironically, Transnistria, a breakaway region of Moldova with pro-Russian sentiments, is the hardest hit where frequent blackouts are common.
The Moldavian government is concerned that citizens from Transnistria will enter the mainland, overwhelming the country's ability to adequately support its population. It said the Russian government is obstructing efforts to assist those in need, creating a crisis. Natural gas accounts for more than half of Moldova's electricity supply. Fortunately, Moldova's power grid links with the European Union’s, allowing it to get some relief.
"EU countries expanded LNG import capacity by more than one-third between 2021 and 2024 and expect more regasification capacity expansions this winter. We estimate regasification capacity to expand in Germany, Italy, Greece, and Poland by a combined 3.5 Bcf/d by January 2025," said the U.S. Energy Information Administration.
The Price Of War For Ukraine DTEK has lost nearly 90% of its generating capacity, supplying 20% of Ukraine's electricity. Its power stations are critical for providing electricity during peak hours. The World Bank earlier estimated that Ukraine's energy sector had suffered damages of $12 billion due to the war.
Over time, Ukraine will connect its network to Europe's high-voltage transmission system. This interconnected system will allow electricity to flow freely between regions. The government must cut ties with Russia and seek more reliable energy partners. However, as the grid becomes more linked, it also becomes more vulnerable to cyber intrusions.
With the United States now supplying LNG to Ukraine, the country can reduce its dependence on Russian energy and secure supplies from a trusted partner. Strengthening energy ties with the United States highlights Ukraine's intention to embrace Western values. Additionally, Ukraine has the potential to become a regional energy hub for Eastern Europe, provided it invests in essential infrastructure such as storage facilities and pipelines.
The United States can now present itself as a global energy provider, although location, logistics, and infrastructure are determinative factors.
"For years, Russia has manipulated energy in Ukraine to keep us dependent. We are targeting our self-sufficiency — to produce as much gas as we consume," says OleksiyChernyshov, now Ukraine's deputy prime minister, in an earlier talk with me.
Naftogaz is Ukraine's largest state-owned energy company, focused on developing oil, natural gas, and renewable energy sources. Currently, it produces approximately 15 billion cubic meters (bcm) of natural gas annually. Ukraine now consumes about 19 bcm, but it had been as much as 50 bcm.
Although Ukraine possesses the third-largest proven gas reserves in Europe, U.S. corporations have the technical expertise to maximize production through horizontal drilling, hydraulic fracturing, and 3D seismic services. If Ukraine successfully increases its production, it could also become a supplier to the European continent.
Russia’s war on Ukraine has transformed the global energy landscape. The United States may take a leading role in this arena, driven by its LNG sales. This is already evident in Western Europe, and it may soon extend to Eastern Europe as well.
forbes.com |
